Archive for August 2011

Malaysian commodities can withstand slowdown

PUTRAJAYA: Malaysian commodities such as palm oil, tin and rubber play such a central role in the global economy that their prices are likely to hold up even in a global slowdown, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said last Thursday.

Chinese imports of palm oil are set to rise next month as buyers are stocking up, he said. Financial markets have fallen in recent days on concerns that an unfolding debt crisis in the US and Europe will stall global economic growth and slow demand for commodities.

"There will be some impact, but Malaysian commodities are key to this global market. Without rubber the auto industry cannot move, and the same be said with palm oil for the food sector and tin for manufacturing," Dompok said in an interview. 

"In fact, we see palm oil demand increasing in September as Chinese importers stock up ahead of the mid-autumn festival and a week-long national holiday in October," he said.

Palm oil prices are currently hovering around RM2,950 to RM3,000 - levels that Dompok expects will persist for this year. Benchmark Malaysian palm oil futures tumbled almost 2 per cent last Thursday after Indonesia changed its export tax structure for palm oil, making shipments from the world's No.1 producer more competitive.

Malaysia, the second-largest producer of the edible oil, has a strict export quota for crude palm oil (CPO), because the government wants to encourage the development of high-value refined products and oleochemicals. Producers that do not have a licence to sell CPO overseas are often highly taxed. Exports of refined products enjoy tax-free status.

Malaysia's CPO exports have risen above 250,000 tonnes a month for the past three months, fuelling speculation that its annual three million tonne quota will be breached.

"We can be flexible (on export quotas) as we want to keep the industry market-driven, bearing in mind that CPO is in high demand in Rotterdam," Dompok said.

He ruled out scrapping the quota on CPO exports, a view shared by market players in Malaysia who are concerned about losing market share to Indonesia, which has slashed its export taxes for refined products.

"The race is on to develop high-end refined products," said a dealer with an international trading house in Kuala Lumpur. "Malaysia understands the need to bend to market pressures with CPO demand in Europe and India, but it is aware that Indonesia wants to catch up in the refining sector with the recent export tax changes."

Malaysia has developed its palm oil sector at the expense of the rubber industry, which has fallen to third place among the world's largest suppliers.

Flagging output as farmers switch to lucrative palm oil has forced Malaysia's large rubber products industry to import. Dompok said efforts were under way to ramp up rubber production with a replanting programme and to expand current acreage by 14 per cent over the next five years to 1.17 million hectares.

"We are taking a long-term view on commodities, whether its rubber or palm oil," Dompok said. "Although the current economic growth issues and their impact on prices are immediate concerns, we have to think far, far ahead on growing the industries." - Reuters

Penans to be resettled in 20,000ha forests

This is written by my colleague Lian Cheng.

KUCHING:Two forest reserves of 10,000ha each is being proposed to be given to the Penan community who have been affected by the Murum hydroelectric project (HEP).

The upper Pelieran Forest Reserve has been proposed to be given to 183 Penan families who are to be resettled at Melalun, about 10km away from the HEP site. At present, these families are residing at Long Menapa (39 families), Long Luar (52), Long Tangau (28) and Long Singu (64).

The Danum Forest Reserve has been proposed to be given to Penans from Long Malim Penan (46 families), Long Malim Badeng Kenyah (35) and Long Wat (83) who will be relocated to Tegulang. 

"It takes a generation for the Penans to learn to be settled farmers. We cannot drag them straight into the 21st century. The forest reserves will serve as a transition for those who have yet to adapt to modern living," said Land Development Minister Tan Sri Dr James Masing in an interview yesterday.

"It has been proposed that they should be given the forest reserves so that the older generation can continue with their traditional lifestyle there. With that, all 347 Penan families will have options. In addition to the forest reserves, it has also been proposed that each affected Penan family be given 15ha of land for them to generate income."

Masing, who is Bakun Resettlement Committee chairman, is also the chairman of the Murum Resettlement Committee.

"All decisions have been reached after consulting the Penan community. It has never been the government's intention to shortchange the Penans. Previously, we were ignorant of the problems that might crop up. We have erred in our judgment and we do not want to repeat our mistakes."

He said the government was not only looking for the best way to solve the problems of the Penans affected by the Murum HEP, it was also visiting the 1,500 Penan families affected by Bakun HEP who were settled at Sungai Asap.

"We understand the 3ha given to each family is not enough to sustain their livelihood. Therefore, the government has decided to give them additional land for them to generate more income. I will seek RM76 million to buy a piece of land, measuring 3,000ha, which will be given to these families," Masing said.

Govt to increase foreign worker levy by RM50 from Sep 2011

PUTRAJAYA: The government will increase the levy for foreign workers by RM50 effective September 1, Home Ministry Secretary-General Tan Sri Mahmood Adam announced today.

Mahmood said the increase was among initiatives proposed by the foreign workers laboratory in managing foreign workers, and that the decision was made after a careful evaluation, including taking into account the last increase in 2005.

However, new foreign worker applications received by the Home Ministry before September 1, would be charged the old levy, along with those who extended their temporary work visit pass. "The new rate is valid for temporary work visit pass applications that expires on or after September 1. New applications and extension of old temporary work pass included," said Mahmood in a statement yesterday.

He said from September 1, the levy for agricultural sector and maids would be RM410, plantation (RM590), factories and construction workers (RM1,250) and service sector (RM1,850).

Mahmood said the new levy for Sabah, Sarawak and Labuan would be comparatively cheaper since the levy charged for construction and factory workers is (RM1,010) and RM1,490 for the service sector.

Meanwhile, Mahmood said that as of yesterday, 2,248,940 legal and illegal foreign workers had registered themselves through Immigration offices and managing companies set up nationwide. From the total, 1,242,813 were made up of illegal workers who were registered through the 6P amnesty programme. -- Bernama

Europe slowdown hits palm oil exports

This is written by Faisal Maliki Baskoro and published in Jakarta Globe.

JAKARTA: Indonesia may fall short of attaining its palm oil export target this year, should a slowing European economy drag down demand, the head of the country’s palm group said.

The Indonesian Palm Oil Producers Association (Gapki) had set its palm oil export target at 18 million tons this year, or 15 per cent higher than last year’s 15.6 million tons. However, its chairman Fadhil Hasan expressed concern about demand from its biggest buyers.

A worker unloads crude palm oil at Tanjung Priok port in North Jakarta. Indonesia may fall short of attaining its palm oil export target this year, should a slowing European economy drag down demand. (JG Photo/Safir Makki)

“If Europe continues to slow down, we may see exports drop slightly below our estimate, to 17 million tons,” he said. “The US economic slowdown will not have an adverse effect as our exports there are very small. But Europe is our second-biggest market as it buys 20 per cent of our palm oil exports,” he added.

He said that in the first half of this year, Indonesia sold 8.2 million tons of palm oil to overseas markets, 10 percent more than the 7.47 million tons sold during the first half of last year.

Despite Europe’s slow recovery, and activists smear campaigns on the supposed environmental impact of oil palm plantations, Fadhil said that Europe imported 1.6 million tons in the first half, 11 per cent higher than the same period last year.

Exports to India, the biggest buyer, are estimated at 6 million tons this year, while China, the third-largest market, is expected to import 2.5 million tons. Shipments to the United States are estimated at around 130,000 tons this year.

He said that demand for palm oil would remain strong in those countries, in line with their large populations. “Overall, we’re expecting export values to reach at least Rp180 trillion [US$21.1 billion],” Fadhil said. Last year, export by value jumped 60 per cent to US$16.4 billion.

Meanwhile, he predicts production will rise to 25 million tons this year, 5.9 per cent higher from 23.6 million tons in 2010.

Fadhil also said that the association would keep looking for new export markets. He cited Eastern Europe, Africa, and Latin America as potential markets. He said the shipping tax adjustment would assist in encouraging further exports.

“The government recently introduced a cut in palm oil export tax, to between 15 and 20 per cent. We believe that this will make Indonesia more competitive and increase exports,” he said.

Crude palm oil (CPO) prices, now at around US$1,075 per ton, are expected to continue to decrease in line with the decline in crude oil prices, and the coming harvesting season, he said. CPO sold for US$1,100 per ton in June.

Franky Widjaja, a deputy at the Indonesia Chamber of Commerce, said that the government could do better in improving Indonesia’s palm oil industry. “The industry could use better access to energy sources, raw materials, skilled labor, and infrastructure. Government and business players could also join hands in research and development,” he said. Franky’s family owns Sinar Mas Group, the biggest local CPO producer.

Indonesia’s US$700 billion economy is forecast to expand by 6.7 per cent next year from an estimated 6.5 per cent this year. Exports account for 29 per cent of Indonesia’s gross domestic product, while private consumption accounts for about two thirds.

IOI Corp's Q4 nets RM548m profit

KUALA LUMPUR: IOI Corp Bhd's (IOI Corp) fourth-quarter net profit was flat despite revenue having increased by 41.4 per cent. Its plantation and property segments contributed higher profit but its resource-based manufacturing segment operating profit was down 37.6 per cent.

The plantation firm's net profit for its final quarter ended June 30 was up 0.1 per cent to RM547.8 million compared with RM547.05 million a year ago.

The manufacturing segment reported an operating profit of RM84.6 million for last quarter compared with RM135.7 million a year ago due to lower sales as well as lower margins from oleochemicals and refineries.

Group revenue for the final three months surged 41.4 per cent in the quarter to RM4.3 billion from RM3.06 billion previously, IOI Corp said in its results announcement yesterday.

For the 12 months ended June 30, IOI Corp's net profit rose 9.2 per cent to RM2.22 billion from RM2.04 billion, while revenue increased 28.8 per cent to RM16.15 billion from RM12.54 billion.

Earnings per share were 8.54 sen compared with 8.57 sen, while net assets per share was RM1.87. The company declared a tax-exempt second interim single-tier dividend of 9 sen per 10 each, to be paid on October 7 this year.

On its current year prospects, IOI Corp said the global economic growth had recently shown signs of slowing down. This would make the new financial year a challenging period for business corporations. "The group is optimistic that it will perform satisfactorily in the new financial year," IOI Corp added.

Aussie govt to oppose palm oil labelling Bill

MELBOURNE: The Australian Government will oppose a Liberal-National Party coalition-supported anti-trade Private Member's Bill on compulsory palm oil labelling as it would breach Australia's obligations under the World Trade Organisation (WTO).

Trade Minister Dr Craig Emerson told Parliament on Tuesday, the Bill, sponsored by independent Senator Nick Xenophon and the Australian Greens, was likely to pass the House of Representatives with the support of the coalition.

Emerson said the Bill passed the Senate following the personal intervention of coalition leader Tony Abbott, who is widely tipped to be Australia's next prime minister.

"Coalition members of the relevant Senate inquiry joined with Labor senators in recommending against the Bill, but their position was reversed following Abbott's personal intervention," he said.

He said all of Abbott's instincts were interventionist and protectionist. "This latest anti-trade move by the coalition comes hard on the heels of the Shadow Agriculture Minister's Bill seeking to overturn a WTO ruling that New Zealand apples be allowed into Australia subject to scientifically-based quarantine conditions," he said.

Emerson said the government refused to deal with the coalition on the apples Bill and would not negotiate with Abbott, who is also Opposition leader, on the palm oil Bill.

"Abbott wants to load up food processing companies with a A$150 million (RM468 million) cost burden and risk a trade war with Malaysia and Indonesia," he said. He said Abbott's personal support for yet another anti-trade, anti-business Bill showed how reckless he was on economic and trade policy.

Both Malaysia and Indonesia had warned they would take action against Australia at the WTO if the Bill were passed. -- Bernama

2nd appeal against Aussie Bill

This is written by my colleague Rupa Damodaran.

KUALA LUMPUR: The Malaysian palm oil industry yesterday made a second appeal to the Australian Parliament not to go ahead with its proposed palm oil labelling Bill.

The legislation will not only undermine a central pillar of the Malaysian economy but would also be a sharp reversal from years of liberalised trade between both economies.

Malaysian Palm Oil Council CEO Tan Sri Yusof Basiron said the Bill would threaten the future of the industry, not just palm oil producers. "It will punish our farmers with an indirect trade barrier, even though the alleged deforestation or orang-utan habitat destruction - the mitigation of which is the prime objective of this Bill - are nothing but non-government organisation (NGO) myths," he said.

He was making a presentation before a public hearing of the Australian House Standing Committee on Economics to provide testimony and answer questions regarding the Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010.

Palm oil has raised hundreds of thousands of small producers from poverty and provides them and their families a sound future, education and a better standard of living.

This is the second time Yusof is presenting Malaysia's case to the Australian legislators.

In April, Malaysia successfully raised its objection to the legislation, saying it is based on misleading claims and aimed at harming its largest agricultural export - palm oil. Although the Community Affairs Legislative Committee recommended that the Bill not be passed, the Australian Senate chose to go ahead, and it is now being brought to the House of Representatives before it is passed as a law.

Malaysia recently completed a high-level ministerial, parliamentary and industry visit to Australia, led by Plantation Industries and Commodities Minister Tan Sri Bernard Dompok, to Victoria and the New South Wales to address the many misconceptions being spread about the palm oil industry.

"We believe, regretfully, that this Bill is targeted at Malaysian palm oil, because of the two major countries capable of supplying palm oil, Australia chooses to import almost 100 per cent of its palm oil from Malaysia."

He also noted that the Bill has been significantly expanded to include any food and non-food products containing or made with the use of palm oil or any of its by-products, making it no longer appropriate to be considered a "food labelling" Bill.

Yusof told the committee that the proposed law violates several principles of the WTO as well as terms of the Asean-Australia-New Zealand Free Trade Agreement. "Claims of the imminent extinction of the orang-utan are without merit and also ignore efforts in Malaysia to preserve the lives and habitats of the country's 16,000 orangutans, through the establishment of wildlife sanctuaries, megawildlife preserves and rehabilitation centres for displaced orang-utans."

KL Kepong Q3 profit leaps 78pc

KUALA LUMPUR: Kuala Lumpur Kepong Bhd's (KLK) third quarter profit ended June 2011 leapt 78 per cent to RM432.76 million from a year ago, thanks to stronger contribution from its oil palm division, oleochemical operations and sale of its cocoa business.

Group revenue rose to RM2.95 billion from RM1.83 billion before.

In a filing to the stock exchange yesterday, KLK said its plantations profit for the quarter climbed 73 per cent to RM454.4 million, underpinned by higher average palm oil price of RM3,085 per tonne, palm kernel oil of RM2,375. Rubber was sold at RM16.15 per kg.

The group's manufacturing profits jumped 68 per cent to RM95.5 million, underpinned by buoyant fatty alcohol performance of the oleochemical division.

For the quarter, KLK sold off its 50 per cent stake in Esterol Sdn Bhd for RM234.7 million. The Klang-based food emulsifier manufacturer was a joint venture with Kerry Group BV, Netherlands.

KLK exited the cocoa business and gained RM43.4 million from the sale of its 40 per cent remaining stake in Barry Callebaut Malaysia Sdn Bhd.

The effective tax rates for the current quarter are lower than the statutory tax rate. This is mainly due to non-taxable income received and the utilisation of previously unrecognised tax losses and capital allowances by select subsidiaries.

KLK is hopeful that the current financial year ending September 30 2011 will be favourable on higher palm oil output and stronger earnings from its oleochemical division.

L'Occitane ups stakes in units

HONG KONG: L'Occitane International SA said yesterday it had bought the 49.9 per cent stakes it did not already own in L'Occitane Suisse SA and in L'Occitane (Korea) Ltd from Clarins BV, as it aims to expand its markets.

The French cosmetics maker also said it had taken over the distribution of its products in Malaysia through the purchase of L'Occitane Malaysia Sdn Bhd from Clarins Sdn Bhd. - Reuters


The news article below was written by Emma An and published on 26th June 2011 in China Daily.

HONG KONG: L'Occitane International SA, the French cosmetics and skincare products maker, said on Monday its full-year net profit rose 22 per cent as more stores were opened and sales grew in most of the markets where it has a presence.

In its second annual results announcement since its Hong Kong listing in April 2010, L'Occitane recorded a 22 per cent year-on-year increase in net profit to €99.5 million (US$142 million) for the year ended March 31 on sales of €772.3 million, 26.1 per cent more than the previous year.

The board proposed to pay a dividend of €0.0135 per share, corresponding to a payout ratio of 20 per cent.

During the financial year, L'Occitane increased the total number of retail locations to 1,828 from 1,541, a year ago, with a net addition of 131 of its own stores. Among new stores, more than 60 per cent were in BRIC (Brazil, Russia, India and China) countries, including 24 on the mainland, said Andre Hoffmann, L'Occitane's managing director and executive director.

"We intend to continue with our ambitious store opening plan not only in emerging markets but also fast growing developed countries," said Hoffmann at a media briefing.

While committed to further expanding its footprint in emerging markets including China, India and Brazil, the French beauty brand will accelerate store openings in developed markets such as Germany, Spain and Italy, where sales leapt by 27 per cent, 30 per cent and 68 per cent, respectively in the year to March.

For the mainland, where L'Occitane currently owns 71 retail stores, the company plans 30 store openings in the 12 months through March 2012.

Despite making up only 4 per cent of its global sales for 2011, the mainland seems poised to overtake Japan as L'Occitane's top market with its stunning growth rate, and Hoffmann acknowledged that this "could happen" despite the "big gap today".

Sales on the mainland soared 46 per cent in the year to March 2011, fueled by new store openings and brisk same-store sales growth, which, at 8.3 per cent, was higher than most developed markets. "The growth outlook for China is fantastic, and we don't see that changing in the near term," said Hoffmann.

In Japan, which generated a quarter of L'Occitane's overall sales, net sales rose 11 per cent, while same-store sales increased 1.8 per cent.

The outlook for its number one market Japan will remain unclear due to the March catastrophe, which caused disruptions to L'Occitane's business in the country in the two weeks following the event, according to Hoffmann.

But a large part of the momentum will still come within Asia Pacific. Of the 549 stores the company plans to open during the coming five years, slightly under a third will be in Asia Pacific. He said that the company is happy with what it has achieved in Hong Kong, where L'Occitane ran 22 stores as of March 2011.

Despite being both a heated and saturated market, as Hoffmann noted, Hong Kong led L'Occitane's same-store sales growth globally with a 20 per cent gain, boosted in large measure by the growing number of mainland tourists visiting Hong Kong and spending money here.

In a research note, JPMorgan analyst Elsa Yang wrote that a good set of results together with further visibility of the company's Japan market will continue to drive the share price. The stock has lost 13 per cent this year, compared with a 4.3 per cent decline for the benchmark Hang Seng Index. L'Occitane's shares slipped 0.9 per cent to HK$18.62 at the close of Monday trading in Hong Kong.

Plantation workers get Raya cheer

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: Hari Raya has come early for some 157,270 plantation workers in Malaysia. From September 1, they will get a 10 per cent pay increase and are guaranteed a minimum monthly pay of RM850, the Malayan Agricultural Producers Association (Mapa) said in a statement.

Mapa hopes that this would help alleviate the hardship and burden of plantation employees due to the rising cost of living.

Normally, plantation employers who are not members of Mapa would voluntarily follow the payment scheme adopted by Mapa. Therefore, it expects the scheme to further benefit, either directly or indirectly, another 70,000 plantation employees, Mapa president Tan Sri Dr Mohd Noor Ismail said.

The 10 per cent revision of wages for all employees would cost the plantation sector an additional RM300 million per year or from RM1.9 billion to RM2.2 billion per year. The arrears of wages and ex-gratia payment would further cost the plantation sector an additional RM364 million, Mapa said.

It also cleared the air over a misconception that plantation employees are earning less than RM350 per month.

Separately, Genting Plantations Bhd, the plantation arm of Genting Group, is giving all of its more than 12,000 estate and oil mill workers and non-executive staff a RM200 pay increase a month, effective September 1.

In a statement yesterday, Genting said the increase is in conjunction with Mapa's scheme.

Analysts: CPO prices likely to decline further

KUALA LUMPUR: Analysts estimate crude palm oil prices to fall further on heightened global economic uncertainties and higher palm oil output, in the second half of the year.

In its notes to investors, MIDF Research reduced its palm oil price forecast to RM3,200 per tonne from an earlier RM3,400.

It downgraded Kuala Lumpur Kepong Bhd, Kulim Bhd and Sarawak Oil Palms Bhd on limited potential upside in its share prices but recommended a "buy" call on defensive stocks of high dividend yield like TH Plantations Bhd.

Another research house, UOB KayHian, maintained its assumptions that the vegetable oil will average at between RM2,900 and RM2,700 per tonne. "All Malaysia-based plantation companies under our coverage posted strong production growth in the second quarter of this year, especially those with larger exposure in Sabah. IJM Plantations Bhd, with 100 per cent Sabah exposure, is likely to post the strongest quarter-on-quarter earnings growth," UOB KayHian said.

"Other Sabah-concentrated planters, such as Genting Plantations Bhd and IOI Corp Bhd, also recorded strong quarter-on-quarter production growth," it added.

Last Friday, Standard & Poor's downgrade of the long-term US credit rating to "AA-plus". Fear over the US credit ratings downgrade and a worsening debt crisis in Europe triggered a broad sell-off across equities and commodities, except for gold. The Reuters-Jefferies CRB index, the 19-commodity benchmark, fell nearly 4.5 per cent last week, its steepest drop since a rout in early May fuelled by concerns of a stalling global economic recovery.

In Kuala Lumpur, palm oil futures had plunged by more than RM180 or 6 per cent in the last three trading days. 

Yesterday, the third month benchmark crude palm oil futures on the Malaysian Derivatives Exchange continued to fall to close at RM2,920 per tonne. This level is 23 per cent lower than this year's high of RM3,780 per tonne traded in January.

HDM Futures, in its notes to traders, said the palm oil futures market is vulnerable to more declines, with prices seen at a support level of RM2,890 per tonne.

A day before news broke out on the US becoming a less reliable debtor, palm oil traders had already anticipated price softening. Palm Oil Refiners Association of Malaysia (Poram) chairman Wan Mohd Zain Wan Ismail reportedly said palm oil prices are likely to soften by 8 per cent to RM2,800 per tonne on higher output in next three months.

"We are expecting softening in palm oil prices ... production is rising and is set to peak in September and October," he said at the sidelines of a vegetable oils conference in Mumbai, India.

According to the Malaysian Palm Oil Board, oil palm planters harvested and squeezed 8.59 million tonnes of crude palm oil, in the first half of this year. That was 8 per cent more than the same six months, a year ago.

Commodities to fall but 'no panic'

SINGAPORE: Commodities, except gold, will likely fall when markets open today due to a US ratings downgrade and a worsening debt crisis in Europe, but panic shall be avoided.

Bullion should benefit from renewed risk-aversion while outlook for demand for oil, base metals and grains deteriorates.

Strong economic growth in China - the world's top copper consumer, No. 2 oil user and major buyer of grains - as well as tight global supplies for some raw materials, including coal and iron ore, will provide certain support and some investors may see weakness as a buying opportunity.

"It should be an orderly decline, nothing to panic about. The important thing now is that confidence doesn't slip too far," said Citigroup analyst David Thurtell. 

Standard & Poor's cut the long-term US credit rating to "AA-plus" on Friday, a move that over time could ripple through markets by pushing up borrowing costs and making it more difficult to secure a lasting recovery.

The cut in ratings for the world's largest economy and a spreading crisis in Europe prompted global policymakers to hold an emergency conference call yesterday to discuss the debt crises in the US and Europe.

"I would expect price action to be choppy and volatile and downward pressure on prices are likely to remain until a more certain trajectory to economic growth is ascertained," said Amrita Sen from Barclays.

The US dollar may weaken and Treasury yields rise after S&P's move, though any selling is likely to be tempered by the escalating crisis in the euro zone.

Olivier Jakob from Petromatrix said a potential steep fall in equities could drag commodities down as some hedge funds will be facing margin calls.

"However if the US dollar debases further that could have a short-term positive impact on oil due to the computerised trading on the dollar fluctuation. But given that the rest of the world (China, Europe) are facing their own financial problems we do not think that any support from a weaker dollar will have a long and lasting impact on the oil prices".

The Reuters-Jefferies CRB index, the 19-commodity benchmark, fell nearly 4.5 per cent last week, its steepest drop since a rout in early May fuelled by concerns about a stalling global economic recovery.

London copper should lead base metals lower and grains may also retreat while gold could retest new peaks.

Gold hit an all-time high of US$1,681.67 (RM4,995) an ounce on Thursday, its 10th record in 18 sessions.

"The initial reaction will be a high degree of uncertainty and thus volatility since investors will not know where to turn for safety," said Mark Mobius, executive chairman of Templeton Emerging Markets group which oversees US$50 billion (RM150.5 billion) in emerging market assets.

"During the sub-prime crisis safety was in US dollars and US Treasuries. Now that anchor to the global community is deteriorating," he said in an email.

However, with China's economy, the world's second largest, continuing to expand strongly, "commodities could be a bit of a haven on a China play," said Citigroup's Thurtell.

"China has not excessively borrowed, they've got a pretty good fiscal position, they've got very high foreign exchange reserves, so China's got the ability to keep growing and that's the bottom line in commodity markets," he said. - Reuters

Malaysia to send reps to Aussie panel hearing

PENAMPANG: Malaysia will send representatives to Australia for a committee hearing to be held before the Bill that requires palm oil labelling, is debated at Australia's Parliamentary level.

This would be another effort in correcting the misconceptions towards Malaysia's palm oil practices, following Plantation Industries and Commodities Minister Tan Sri Bernard Dompok's recent visit to the land down under.

"As we know the Australian Senate has passed the Food Standards Amendment (Truth in Labeling - Palm Oil Bill) ... But before the Lower House of the Australian Parliament's debate, there will be a hearing at the committee level.

We are sending representatives and the hearing this time will be on the economic aspects and what we will explain to the Australians is that the oil palm industry has lifted a lot of Malaysians out of the poverty trap, especially in rural areas, with not less than 600,000 people directly or indirectly employed in the plantation industry," he told reporters after launching a district level 1Malaysia futsal competition here yesterday.

He said Australians should be aware that smallholders represented 40 per cent of the industry, which meant if this commodity should be labelled as something unsafe to consume, it would affect the source of livelihood for a lot of people in Malaysia.

Dompok led a delegation to Australia in July to promote several commodities, including rubber and timber, but special focus was given towards lobbying Australians against the Parliamentary move that could threaten Malaysia's palm oil industry.

Asked on when the committee hearing would be held, he said Australian Parliament had set an August 15 deadline for those wanting to present a case and hearing would be fixed hereafter.

"The Malaysian team will consist of people on the ground, experts that have done research on palm oil and will have a chance to present themselves and defend their submissions before the Parliamentarians," he added.

Dompok has also asked the Malaysian Palm Oil Board to hold seminars and workshops in Australia in order for locals to participate and understand more about Malaysia's palm oil industry.

He said although Australia has stated three grounds as reasons to pass the Bill, they were all unfounded due to misconceptions.

"They cited depletion of forests (environmental grounds), displacement of orang utans and that palm oil was harmful on health grounds ... but it is a known fact that Malaysia is committed to preserving at least 50 per cent of total land as forests, and today we have 55.3 per cent as forest reserves.

"And, to say we have destroyed orang utans' habitat due to forest cutting is also not true ... orang utan population is mostly in the east coast of Sabah and smaller numbers yet in Sarawak, where both states have sanctuaries for these primates ... While the health issue of palm oil has been addressed in the past and is no longer an issue," Dompok explained.

In fact, he said the misconceptions towards Malaysia's palm oil practices and the treatment of its wildlife has spread to other countries, which has led to the international community coming to wrong conclusions.

"I have previously visited a zoo in Netherlands, where they had a lot of negative materials pasted around the zoo on how orang utans were kept in Malaysia and how palm oil cultivation was leading to forest depletion.

"When I spoke to some of the zoo staff, they did not know that there were still abundant orang utans in Malaysia. This shows complete ignorance and it is being furthermore fed by (international) NGOs. I told them that they should come and see for themselves in Malaysia," he added. - Bernama

Malaysia's path to high-income growth

This was written by Dr Robert J. Shapiro, who was undersecretary of commerce for economic affairs under United States President Bill Clinton. He is now chairman of Sonecon LLC, a global economic consultancy.

MALAYSIA stands at an important crossroads. It has successfully engaged with world trade and globalisation, adopted advanced technologies and undertaken the necessary public investments in education and infrastructure required to achieve middle-income status. 

It has achieved world-class status in certain sectors, most notably vegetable oils, natural gas and certain electronic products.

But Malaysia also faces a challenge common to many middle-income economies: how to manage the transition to join the ranks of fully modernised, high-income nations?

The answer is to intensify its engagement in the global economy, solidify its commitment to economic and political stability, and redouble its public investments in education and infrastructure. 

These are the necessary ingredients to produce an economy truly open to adopting the technological and organisational innovations of the world's most advanced economies and capable of generating some of those innovations on its own.

Since 1990, the share of everything produced in the world that's traded across borders has jumped from 18 per cent to more than 30 per cent -- the greatest increases and highest levels ever seen in history. Moreover, cross-country investment has grown twice as fast as worldwide trade.

The most important kind of transfers has been "foreign direct investments", where multinational companies build factories and other operations around the world.

The use of those foreign direct investments -- and the direct purchase of those technologies by native businesses -- has produced a new dynamic in the world economy: for the first time ever, worldwide growth is driven not by the advanced countries, but by those parts of the developing world, including Malaysia, that effectively have embraced globalisation.

Malaysia was for a time a commodity-based economy, and commodities remain critical to its prosperity. About 22 per cent of Malaysian exports are commodities -- led by palm oil, then followed by oil and natural gas.

It's a strength that Malaysia is the world's second largest producer and exporter of palm oil. Indeed, the palm oil sector's achievements in harnessing new technology, delivering foreign investments to Africa, developing a skilled labour force, and embracing global markets offer Malaysia a sound model for how other sectors should grow and mature. 

The palm oil sector can help point the way towards high-income status. In my recent speech before the Malaysian palm oil industry, I noted the ways in which the palm oil industry is contributing to Malaysia's development and prosperity.

Palm oil has widespread practical application for everyday consumer products; an ingredient for food staples and confectionary products in the developed and developing worlds; health supplements; personal care products such as soaps and detergents; and medical treatments.

In one recent example of many of these dynamics, the area of Lahat Datu in Sabah was recently reported as set to become the country's centre for downstream use of palm oil waste products for the manufacture of pulp and paper.

In the future, we may also see palm oil assume an important place as a biofuel supplement to gasoline or even a biomass source of energy for electricity generation.

In fact, palm oil is already a growing source of biodiesel in the United States and other countries. It is therefore no surprise that the palm oil sector is the largest single contributor to Malaysia's gross domestic product, accounting for 7.5 per cent of that GDP last year.

And perhaps most important for the future modernisation of the Malaysian economy, the industry produces "spillover" benefits by demonstrating to other industries the advantages of adopting advanced technologies and business methods.

The reforms under the New Economic Model and Pemudah will help improve business and could also contribute even more towards economic growth by expanding commitments to research and development and worker training, and promoting greater openness to trade and investment. These, along with a redoubled commitment to public investment in education, will help Malaysia advance towards high-income status.

The West can do its part as well by lowering certain trade barriers and ensuring access to its wealthy markets -- and Malaysia will have to return the favour by lowering its trade barriers. That's also a vital part of engaging in globalisation.

There's not much time. Malaysia is in the midst of an historic baby boom-baby bust cycle, just like the ones that affected the Asian Tigers 40 years ago, and the United States, Europe and Japan 30 years before that.

Today, 30 per cent of Malaysians are under age 15, and only five per cent are over age 65.

The economic miracles of Taiwan, South Korea, Hong Kong, Singapore -- and Germany and Japan before them -- were all built on a convergence of baby booms, investments in education to prepare those boomers to be productive, reforms to increase investment so that jobs were waiting for them, and flows of foreign direct investment to modernise the economy.

Without all of that, baby booms can produce nation-sized mobs of unemployed young people, as seen in parts of Latin America. And just as it has everywhere else, Malaysia's baby boom will be followed by a baby bust, which will produce additional new challenges.

Now is the time to strengthen the policies and commitments that can make the best use of Malaysia's baby boom and help Malaysia strive to be a high-income country a generation from now.

Palm oil, along with electronics, can provide the models. They are among Malaysia's leading export products, developing more and more applications every year. 

As they help develop new technologies and encourage innovation, the oil palm and electronics sectors in Malaysia can help contribute to the evolving "ideas-based economy" that has helped sustain economic growth in another high-income country -- the US -- for so many decades.

Firms exploiting illegals

PUTRAJAYA: The Home Ministry has again warned management companies it has appointed not to overcharge illegal immigrants they register under the ongoing amnesty exercise.

The ministry's deputy secretary-general, Datuk Alwi Ibrahim, said companies which were caught doing so risk having their certificates of appointment revoked and their names blacklisted. He reiterated that illegal immigrants who registered with management companies would only need to pay RM35 each.

Those who register themselves at Immigration offices would not be charged a sen.

There are 336 management companies and 197 Immigration offices throughout Peninsular Malaysia where illegal immigrants can register under the exercise, dubbed the 6P Programme.

"For now, the management companies can only collect registration fees and are allowed to charge RM350 for the legalisation process only when it begins. The management companies had agreed to this procedure before they were appointed," said Alwi.

He added that the legalisation process would only start after the registration. He said this this after meeting with several management companies.

Immigration saddled with 'runaway' problem

This is written by my colleague Sim Bak Heng.

JOHOR BARU: The Home Ministry's legalisation exercise for foreign workers has attracted the least expected group -- legal foreign workers.

A sizeable number of legal foreign workers have been found to have exploited the exercise by "turning themselves into illegal workers" as soon as they heard the news about the exercise. 

The Immigration Department is not puzzled by the weird move, however. It is well aware of the tactics as these workers intend to run away from their employers in the hope of switching to better-paying jobs. The department has warned these workers against running away from their employers by telling them that no new work permits will be issued.

Immigration director-general Datuk Alias Ahmad said he received numerous complaints from employers and associations about the "runaway" problem.

"Do not attempt to abuse the good intent of the legalisation exercise and underestimate the department's wisdom. Remember, if you are a legal foreign worker, the department has the details of your work permit. Turning yourself into an illegal foreign worker and hoping to switch to a better-paying job or a different field, will only land you in hot water. I know some parties are instigating legal foreign workers to turn into illegals because there is money to be made," he told the New Straits Times.

The problem of runaways started following the announcement of the legalisation exercise for illegal foreign workers in June. The problem is experienced across many industries, including the construction, manufacturing and service sectors.

Small and Medium Enterprises Association of Malaysia deputy president Teh Kee Sin said legal foreign workers ran away for higher basic salaries, more overtime claims, better working environment and employers. He said foreign workers, like locals, also wanted to avoid dirty, difficult and dangerous work -- simply called the 3Ds.

While there is no statistic on the runaway rate, he said it was easily more than 10 per cent. "Some of the runaways are encouraged by employment agencies who see them as a golden opportunity to make money."

Furniture makers in Johor are worried as the runaway rate is between 10 and 20 per cent of the labour force in the sector. Muar Furniture Association chairman Bo Eng Chee said furniture makers not only lost their workers but also the levy they paid to employ foreign workers.

Meanwhile, Alias said the department was seeking the cooperation of all foreign embassies not to issue passports for runaway nationals. He urged all employers facing the problem of runaway workers to report to his department, the police and the respective embassies.

"By lodging a report with us, the levy they paid for their foreign workers will be safe."

Malaysia plans own palm oil cert scheme

This is written  by my colleague Zaidi Ismail.

SYDNEY: Malaysia plans to come up with its very own national certification scheme on the sustainable production of palm oil to tell the world that its oil palm plantations are grown in adherence to the country's environmental protection policies and do not involve the clearing of virgin forest.

Malaysia's oil palm sector currently do not have a state-sponsored certification scheme for its oil palm estates. This is because unlike, the timber sector, the oil palm sector does not have any illegal felling of trees.

However, three million out of 17 million tonnes of palm oil products produced last year are certified by the Roundtable on Sustainable Palm Oil (RSPO), a voluntary business-to-business grouping.

Malaysia's oil palm sector is heavily regulated by the government-owned watchdog agency the Malaysian Palm Oil Board, which has enforced over 60 laws spanning across 16 activities along the entire palm oil chain from upstream to downstream.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said the government, together with the industry, is on the drawing board on how to come up with the certification scheme.

 "This is at a premilinary stage. But we will go ahead because the RSPO keeps on changing its goalposts on how to produce sustainable palm oil. We will come up with a national certification scheme," Dompok said in a palm oil forum here over the weekend.

Dompok is leading a working visit to promote palm oil, timber and rubber in Australia until August 3. He said the government is looking at national certification because even with RSPO-certified palm oil, big users such as Unilever are still not buying in huge volume for reasons known only to them.

Malaysian Palm Oil Council chief executive Tan Sri Dr Yusof Basiron said the certification scheme will cover areas not covered before such as deforestation.

 "The industry is already highly monitored. We willl just tweak it a little bit and look at what the market and the NGOs (non-governmental organisations) want. It they don't want deforestation, then we will include it in the certification requirements. If they don't want orangutan to be destroyed, we will include that too."

Yusof added that the certification will emulate Indonesia, which is also coming up with its own national certification scheme.

Meanwhile, Australia-based Moi International business development manager Jim Snell said the certification is timely because RSPO is not doing a good job. Small manufacturers like us just want to buy small amounts of palm oil. Even then we can't get it. We don't know how to get RSPO-certified palm oil. Malaysia should just go ahead with the certificaton scheme and tell the world that its oil is certified unlike rapeseed, canola and soyabean oil," he said.

National Association Smallholder Malaysia secretary general Zulkifli Mohd Nazim said the national certificate will help the country's over 300,000 smallholders get certified as the RSPO is too expensive and the smallholders cannot afford it.